Lactose is a carbohydrate consisting of glucose linked to galactose. Lactose is the major carbohydrate in human breast milk, cow milk, and in most milk-based infant formulas.

While most infants will thrive on a formula that contains lactose, some infants are lactose intolerant. Lactose intolerance is due to a lactase enzyme deficiency (low levels of enzyme activity) in the small intestines. Lactase enzymes are necessary for "digesting" lactose by breaking the link between glucose and galactose. The intestines can then absorb the smaller glucose and galactose molecules. In infants who are lactase deficient, the undigested lactose cannot be absorbed. This, in turn, can cause diarrhea, cramps, bloating, vomiting, and gas. Lactase deficiency is more common in premature infants than in full-term babies. Lactase deficiency can also develop temporarily during recovery from viral gastroenteritis (commonly referred to as the "stomach flu"). Finally, lactase deficiency can be inherited (rare).

For infants with lactose intolerance, formulas that contain no lactose can be used. Lactofree is an example of a milk-based formula that contains corn syrup solids rather than lactose as its carbohydrate calorie source. Many soy-protein formulas also do not contain lactose and are suitable for lactose intolerant infants. In addition to corn syrup solids, other examples of carbohydrates contained in lactose-free formulas include sucrose (table sugar), tapioca starch, modified cornstarch, and glucose polymers (short chains of glucose molecules).